This week, for those not closely tied to the public sector, is National Public Service Week (NPSW). A time where the Canadian public service engages in self-congratulations.
(That's not a knock on the public service, these special days, weeks, and/or months of self-congratulation are common; everyone from engineers to secretaries to clowns have them nowadays. The idea of special weeks of self-congratulations has always seemed silly to me, but that's not reason for this post, so I'll move on).
This morning the Sun had the op-ed "Flagrant misuse of tax dollars" on the front page, which complained about the use of tax dollars for a public service event. For some reason, probably due to its visibility and a lack of knowledge of other events, they focused on this one particular inter-government event, but most government departments and units usually have events in this week, with these events ranging anywhere from free cake to discussions/speeches on the public service to an afternoon of team-building games to the discussed party. There's even a ceremony for the awarding of the Public Service Award of Excellence in the National Capital Region.
The Sun's piece was somewhat pathetic. Generally, I am in agreement with the Sun's editorial stance against government over-spending & over-taxation and in favour of sound fiscal management, but this article was petty and borderline vindictive.
(Advice to the Sun, articles like this only serve to undermine the cause of limited government and fiscal responsibility. It may rile up parts of your base of right-wing populists, but it drives away moderates, fiscal conservatives who'd agree with you but would be more apt to read the National Post, and even parts of your own base with a little more perspective on things).
In a coincidence, the WFP had an op-ed on the Harper Hockey "scandal". The WFP article (originally from the Calgary Herald) was a well-done piece, I would suggest a read.
Also floating around in the news in the last little while are the Canada Post strike, the Conservative spending review and promise to reduce the budget by $4-billion by next year, The Auditor's report on G8 spending, and discussions on Senate reform.
This prompted me to write this post on the necessity of perspective when discussing government finances. Both the ruckus over Harper flying to the Canucks game and the Sun's reaction to NPSW event are seriously lacking in this.
The cost of the Canuck's flight is estimated to cost up to $10,000/hour and a direct flight is under an hour each way. Harper followed the rules, paid for his own ticket, and paid the amount of commercial-equivalent airfare, so there's no ethics questions involved in this debate. In total, this cost at most $20,000 for Harper to show support for "Canada's team" in the finals for "Canada's game". You may or may not agree whether Harper should have flown to support the team, the fact is that the cost would not matter either way in this discussion. $20,000 may seem like a large amount to individuals, but in terms of government spending it is not even a rounding error. The National Post puts it into perspective for us here. Canada paid almost $50-million in MP pensions for this year alone. Making a ruckus over a one-time use of less than $20,000 is pointless, petty, and idiotic.
I can find no data on the cost of the NPSW or any on average civil servant wages in Canada, so I'll guesstimate.
PM, EC, AS, and CR are the most common wage categories in the federal civil service, CR's are paid significantly less than the other categories, who are paid roughly the same. Rates of pay for government workers can be found here. We'll use a salary of $50,000 (roughly equivalent to a PM-02 and and easy number to work with), so the wage would be roughly $25/hour.
The event had 300 employees, and we'll estimate it took 2 hours. So, in total we can estimate cost in salary as near $15,000. $15,000 is not that big a deal when it comes to government spending. If we calculate a two hour event at that wage over the 263,000 civil servants in the federal service the cost would be a bit over $1.3-million, which would seem like a lot, but again in government finances, a million or two is hardly a rounding error. (For another example, the 2011 budget came in at an unexpected $4-billion less than was forecasted).
On top of this, team-building exercises and celebrations are common practice in private organizations, so it's not like it can even be pretended that this is some special perk for civil servants.
To put it simply, complaints, such as the Suns, about the NSPW are as petty and idiotic as complaints about Harper's trip to the Canuck's game.
The Senate debate and the Monarchy debate also sometimes display this kind of fiscal lack of perspective. In complaining about the Senate, the anti-Senate NDP notes that the Senate costs $90-million a year. A seemingly large amount, but in reality a paltry $3/Canadian. The governor general costs about $35-million a year, about $1/Canadian. In terms of government finances both of these number are next is nothing. This doesn't mean objections to the Senate or the Monarchy are not to be taken seriously, but the minimal cost should be irrelevant to whether you believe they should exist or not.
The cost of an election is another issue lacking perspective. Elections Canada pegged the cost of an election at about $300-million causing the Toronto Sun to whine. This is about $10/Canadian. Surely any reasonable person would say that $10 is worth a free electoral democracy.
At this point, though, I may be giving off an appearance of a free-spending socialist, but I am not. I am very much fiscally conservative. The thing is though, government expenses have to be evaluated realistically and in perspective, the costs of the previous issues are all examples where the impact of the costs was blown out of proportion.
Also blown out of proportion are funding cuts. The Conservatives announced that they would cut the federal budget by $4-billion/year by 2014-15. The usual suspects of socialists and unions cried foul and scare-mongered about massive job losses and cuts to public services. The reality is $4-billion is 1.7% of the 240.8 billion budgeted for last year.
1.7%
Let that sink in a bit. The biggest budget cuts since the 90's that is to bring ruin to the public service is a piddly 1.7%. This is only half of the projected $8-billion increase in federal expenditures between from last year to this year. It is also only 11% of the projected deficit for this year. $36.2-billion deficit for this year. The impact of these cuts is also grossly over-exaggerated. The cuts are substantial, but they are not earth-shattering.
Maclean's illustrates the exaggeration surrounding the impact of these cuts.
So then, how do we keep things in perspective?
First of all, little things do add up. "A billion here, a billion there, pretty soon it adds up to real money." Enough small cuts can add up to major savings. The reverse is also true, enough new small expenditures can quickly snowball to take large chunks of the budget. As the Maclean's article stated:
The federal government will spend nearly $40 billion this year in “other transfers,” that is, neither to provinces nor to people, but to organizations: big businesses, small businesses, native bands, social clubs, in fact just about anything with a business card and a mailing address. Just to list the “grants and contributions” over $100,000 takes up 280 pages in the Public Accounts, in six-point Helvetica.
Enough relatively tiny expenses can rapidly add up, so just because something might be little more than a government rounding error, does not mean it should not be evaluated, but neither should all sense of perspective be lost.
Second, don't get caught up in partisan or ideological rhetoric lacking fiscal perspective, whether from the left or right.
Third, remember that there are reasons for cutting programs other than monetary. This was mentioned earlier in relation to the Senate and Monarchy. As another example, the Gun Registry has to go. $2-billion over 15 years is pocket change, but the program is more objectionable for its purpose of controlling gun owners than for its costs (although being 2000% over-budget is a sign of gross incompetence).
Fourth, keep in mind that just because costs might be relatively small and we should avoid a lack of perspective, they can still be helpful. For example,
the CBC can be privatized for $1-billion savings each year, as TV and radio services are readily available from the private sector and as such, there would be no real loss to the Canadian public at large, despite the protestations of some special interests to the contrary. We should avoid pretending that the $1-billion would be some budgetary windfall, it would not be, but enough $1-billion cuts here and there and it would add up.
Fifth, keep in mind the big ticket items:
Civil servant salaries & pensions - Salaries, benefits, and pensions make up the bulk of operating expenses. A small percentage increase in civil servant salaries can lead to billions in new spending. Reigning in public sector unions and continual large increases in civil servant wages is important in controlling government costs. Civil servant pensions are fairly well run in Canada and should not present to much of a problem. In the US they are a lot more of a problem, because the US has had a habit of raiding pension funds to spend, leaving their plans with gaping fiscal holes. Canada only had one major pension raid in the Chretein era during a time of surplus, and is well run enough that it should not present to much problems, but with defined-benefit plans, continually lengthening life expectancies, and the boomers retiring there could always be problems if markets do not do well.
Health spending - This is the big one; the expense that really needs to be watched. The Conservatives committed themselves to a yearly 6% increase in health transfers. This is not mathematically sustainable unless GDP also increases at an unrealistic 6% a year (it usually only increases only about 3 or 4%). This does not even include the inevitable increases in provincial spending. With the boomers growing old, public health spending will likely become unsustainable in the context of the current system. It will have to be reformed, likely with some amount of privatization and market reforms or the system will break (barring massive, unexpected productivity gains from technology).
Pensions - Again, the CPP have been fairly well run, has a diverse investment portfolio, is a hybrid between pay-as-you-go and fully funded, and as far as I know the CPP has never been raided. This should be fine, but it is a big ticket item and a prolonged recession combined with extended life expectancies and the boomers retirement could cause serious fiscal problems. It is something to be watched, but should be stable.
Debt servicing - This has decreased tremendously since the 1990's, but last year we paid $30.9-billion out of a total spending of $271.7-billion, about 11% of the federal budget on nothing more than interest payments. And this is with exceedingly low interest rates. A rate hike could increase this substantially.
Notice how all the most important items are those that will have the most public resistance to cuts. This is why deficits occur and taxes increase. Few are willing to pay the political costs necessary to reign in the important items. Chretein kind of did, but did so through raiding pension funds (creating its own problems) and devolving to the provinces (simply shifting the tax burden) in addition to public service cuts.
Essentially, what I am saying is that when discussing public spending avoid losing perspective. Some expenses, such as a hockey game, are just so small they are not worth making a big deal over. Some expenses, such as elections, are large, but the value is well worth the expenses. Small changes add up, but hysteria towards either small cuts or increases does no one any good.
To finish off, I can't have a post called Public Waste without mentioning the Kipling poem of the same name, it's only tangentially related to today's topic, but an excellent poem nonetheless. I would suggest you check the link and give it a read.
Thanks, I try.
ReplyDeleteI think I need an editor though.